Bankruptcy / Exemptions

What Are Bankruptcy Exemptions in 2024? 6 Things You Need to Know

Written by Ben Tejes
Updated May 16th, 2024
This article is for informational purposes only. Ascend does not provide legal advice, and are not attorneys. If you'd like to speak with a bankruptcy attorney that serves your city, you can speak with one in a free consultation.

Considering bankruptcy can be a scary thing, especially when people fear losing their home or their vehicle when filing bankruptcy. For example, the bankruptcy homestead exemption may help you protect your home even if you file a Chapter 7 bankruptcy.

When you feel like you are backed into a corner and not sure what your next move should be, bankruptcy may sound terrifying. But the intention of bankruptcy is a noble one — one that hopes to move you from a place of feeling overwhelmed by debt to a place of financial stability. 

1) What is a Bankruptcy Exemption?

Bankruptcy exemptions allow you to keep a certain amount of your assets safe while filing for bankruptcy. Things like cars (typically inexpensive cars), tools you need for work, furniture, and retirement accounts are all considered exempt, up to a certain amount. Each exemption category has a limit to what you can keep, and it changes from state to state. 

We built the following bankruptcy exemptions calculator to help you estimate whether you are at risk of losing your belongings. The calculator uses your state's bankruptcy exemptions.

2) Understand Bankruptcy Exemptions

Exemptions in Chapter 7 bankruptcies protect your assets from liquidation. As mentioned earlier, in Chapter 7 bankruptcy, the court puts a trustee over everything you own. Their goal is to liquidate, or sell, whatever is possible to help pay off your creditors before dismissing the debts. However, exemptions protect certain things from liquidation. 

When you file for Chapter 7 bankruptcy, the court requires you to list anything and everything that you own. This becomes the ‘estate’ that the trustee will take over. The trustee has the right to sell or liquidate almost anything that is valuable to pay off your creditors when the value is above the exemption. 

The following are some bankruptcy exemptions:

  • Motor Vehicles (up to a certain dollar amount)
  • Pensions
  • Reasonably necessary clothing
  • Reasonably necessary furniture
  • Household appliances
  • Pensions
  • Jewelry (up to a certain dollar amount)
  • Tools (used for work, trade, or up to a certain dollar amount)
  • Damages awarded for personal injury
  • Equity in the debtor’s home (up to a certain dollar amount)
  • Unpaid but earned wages (up to a certain percentage)
  • Public benefits received
As seen above, there are certain exemptions that are more detailed than others, especially if the asset is exempt up to a certain amount or percentage. An example of a partial exemption may be something like your car. If your state allows a $5,000 exemption for a vehicle, and your car is valued at or under that valuation, then you can keep the car. However, if your car is worth $10,000, it is well over the exemption limit and the trustee would be able to liquidate your car to pay the creditor. 

How Much Cash Can You Keep in a Bankruptcy?

In bankruptcy, the amount of cash you can keep depends on various factors, including the type of bankruptcy you file and the exemptions available in your jurisdiction. Typically, when you file for bankruptcy, you're required to disclose all your assets, including cash on hand.

In Chapter 7 bankruptcy, which involves liquidating assets to pay off creditors, the trustee may scrutinize your cash holdings to determine if they can be used to repay debts. However, certain exemptions may protect a portion of your cash from being seized. These exemptions vary by state but often include a homestead exemption, which protects a certain amount of equity in your primary residence, and exemptions for essential items like clothing, household goods, and tools of the trade. Some states also offer a wildcard exemption that can be applied to any asset, including cash.

In Chapter 13 bankruptcy, which involves creating a repayment plan to pay off debts over time, you get to keep your assets, including cash, but you must use your disposable income to make payments to creditors.

Overall, the specific amount of cash you can keep in bankruptcy varies depending on your individual circumstances and the laws of your state. It's essential to consult with a bankruptcy attorney who can provide guidance based on your situation and help you maximize the protections available to you.

3) Bankruptcy Exemptions By State

See the bankruptcy exemptions by state below to understand the bankruptcy exemptions for your state.

Alabama Bankruptcy Exemptions
Alaska Bankruptcy Exemptions
Arizona Bankruptcy Exemptions
Arkansas Bankruptcy Exemptions
California Bankruptcy Exemptions
Colorado Bankruptcy Exemptions
Connecticut Bankruptcy Exemptions
Delaware Bankruptcy Exemptions
District of Columbia Bankruptcy Exemptions
Florida Bankruptcy Exemptions
Georgia Bankruptcy Exemptions
Hawaii Bankruptcy Exemptions
Idaho Bankruptcy Exemptions
Illinois Bankruptcy Exemptions
Indiana Bankruptcy Exemptions
Iowa Bankruptcy Exemptions
Kansas Bankruptcy Exemptions
Kentucky Bankruptcy Exemptions
Louisiana Bankruptcy Exemptions
Maine Bankruptcy Exemptions
Maryland Bankruptcy Exemptions
Massachusetts Bankruptcy Exemptions
Michigan Bankruptcy Exemptions
Minnesota Bankruptcy Exemptions
Mississippi Bankruptcy Exemptions
Missouri Bankruptcy Exemptions
Montana Bankruptcy Exemptions
Nebraska Bankruptcy Exemptions
Nevada Bankruptcy Exemptions
New Hampshire Bankruptcy Exemptions
New Jersey Bankruptcy Exemptions
New Mexico Bankruptcy Exemptions
New York Bankruptcy Exemptions
North Carolina Bankruptcy Exemptions
North Dakota Bankruptcy Exemptions
Ohio Bankruptcy Exemptions
Oklahoma Bankruptcy Exemptions
Oregon Bankruptcy Exemptions
Pennsylvania Bankruptcy Exemptions
Rhode-Island Bankruptcy Exemptions
South Carolina Bankruptcy Exemptions
South Dakota Bankruptcy Exemptions
Tennessee Bankruptcy Exemptions
Texas Bankruptcy Exemptions
Utah Bankruptcy Exemptions
Vermont Bankruptcy Exemptions
Virginia Bankruptcy Exemptions
Washington Bankruptcy Exemptions
West Virginia Bankruptcy Exemptions
Wisconsin Bankruptcy Exemptions
Wyoming Bankruptcy Exemptions

4) How Does Chapter 13 Bankruptcy Help Protect Non-Exempt Assets?

Chapter 13 Bankruptcy differs from Chapter 7 bankruptcy. Instead of trying to sell everything to pay off creditors if equity is above the exemption, with Chapter 13 bankruptcy, your goal is to pay off creditors over a longer period of time while keeping what you own. 

This means that you may be able to keep your home or car regardless of the homestead exemption.

When you file for a Chapter 13 bankruptcy, one of the first and most important steps is determining what all you own, the amount of money you make, and how much you owe to creditors. Figuring out these things is what determines how much you will pay back to creditors each month.

5) Things Specifically NOT Exempt

While there are a lot of things covered under exemptions for both Chapter 7 and Chapter 13 bankruptcies, there are many other things that are specifically non-exempt. This can vary widely based on your location, what type of bankruptcy you are filing, and what your total assets are. Things like luxury items, second homes, and more may be non-exempt and can either be liquidated to pay off creditors or added to your disposable income total. 

6) State and Federal Exemptions

When filing for bankruptcy, it is important to note that there are two sets of exemption laws. The state exemption is what your state offers as an exemption. These do not have to match your federal bankruptcy exemptions, which is the exemption offered nationally. There are some states where you can use federal bankruptcy exemptions and other states where you cannot.

Here are the states that allow you to use federal bankruptcy exemptions:

District of ColumbiaHawaiiKentucky
New HampshireNew JerseyNew Mexico
New YorkOregonPennsylvania
Rhode IslandTexasVermont

States that allow you to use federal bankruptcy exemptions

For instance, Texas may have an excellent homestead exemption, so if you are a Texan, it may be worth filing under the state exemption. Comparatively, New Jersey has pretty strict exemptions, which is why a lot of New Jersey residents may find themselves filing under federal exemptions. Make sure you work together with your legal representation to figure out which exemption works best for you!

How Does Bankruptcy Work

Bankruptcy is a legal court proceeding where a judge and bank trustee oversee and manage the financial situation of an individual. Typically, you decide to declare bankruptcy when you are no longer able to continue paying off the debt you have incurred. There are many reasons why this might happen. Unemployment, divorce, overwhelming medical bills, and excessive credit card debt are just a few of the many reasons people find themselves needing to file for bankruptcy. 

There are a few different types of bankruptcy. Two of the most common forms are Chapter 7 and Chapter 13 bankruptcy. Chapter 7 bankruptcy tends to be more intense. The court liquidates your assets to pay off your debt. But you tend to go through the process relatively quickly, and you come out with considerably less debt than when you start. Chapter 13 bankruptcy is for people who can continue to make payments on their debt but need help lowering their payments and extending their payout schedule. 

Both forms of debt can be helpful in different situations, but both can also be intimidating. One of the common misconceptions about filing for bankruptcy is the thought, “I will lose everything!” This can be a nerve-wracking thought, especially in such a high-stress situation. Fortunately, this may not be as accurate as you think. 

When filing for bankruptcy, you do have to give control of your financial situation to someone called a bankruptcy trustee. Depending on what kind of bankruptcy you file for, the trustee is either in charge of liquidating your assets and paying down your debts or they meet with you and your creditors to find a suitable payment plan that works for everyone involved. Because they take charge of your financial situation, it may feel like you will lose everything you have. Fortunately, there are Exemption Laws that allow you to maintain some of your assets, even when you file for bankruptcy. 

Can You Keep Your Home or Vehicle Using Bankruptcy Exemptions?

Each state has various bankruptcy exemptions. As such, you can use the following bankruptcy exemptions calculator to estimate whether you are at risk of losing your belongings.